Will Fourth Industrial Revolution help to usher in Chinese Era of Belt Road Globalization?

In this article the relation between political upheavals and different stages of industrial revolutions will be explained. Here each of the three previous industrial revolutions will be explained and it will be shown how they caused different types political upheavals. The author will also try to judge whether and how the social and political changes shaped the previous three industrial revolutions. Then the author will try to predict whether and how the fourth industrial revolution will determine or be determined by the economy, society and politics of the twenty-first century. The author will analyse in this framework if Fourth Industrial Revolution will help to usher in an era of Belt Road Globalization.

Pre Industrial Revolution Production

Before the first industrial revolution, global productions were centred in China, India and South East Asia. Their production is mainly bio-energy based where humans and animals were main source of energy which used different tools and machines in the production process. Wind energy was used mainly in seas and rivers. Production was mainly needs based which used to cater mainly neighbouring demands. Their products passed through Central Asia and West Asia to Europe. This international trading route was called silk route which also gave rise to many civilizations.

The Rise of West

The Western Europeans started their agro civilization much lately in 500 AD compared to Asia. By late 15 ^th century AD, they reached global production hub of Asia skipping Muslim dominated silk route through oceans. Asians were far superior in production and so Westerners started having trade deficits with the Asian kingdoms. Westerners had to resort to piracy and colonialism using their superior navy, war techniques and social organization of nation state. In 16 ^th century AD, Britain, the landlords turned into money motivated capitalists and they started evicting peasants from their lands for lucrative wool trade. These evicted farmers either became cheap wage labourers in cities or became soldiers of the rising British Empire across the globe. This created industries and production centres all across Britain where money was invested for profit rather than luxurious consumption. By mid-18 ^th century AD, British began to colonize India and started to destroy its production deliberately using trade policies and coercion.

First Industrial Revolution (IR-1)

The rise in numbers of landlord turned profit seekers and evicted farmer turned wage labourers and vacuum in global market due to gradual destruction of Indian production created opportunity for British to start water, coal and steam power led IR-1. The process started in 1760s. Power loom was invented and textiles productivity rose considerably. Industries replaced agriculture as the main source of income and employment. IR-1 soon spread throughout the West.

This gave birth to the politics of nationalism and liberalism. The USA got independence from the British Empire in 1776 and started their industrial revolution. The most populous country of Europe was shaken by French Revolution during this period. While in Britain peasants were evicted from land, in France peasants destroyed all rental rights and privileges of feudal classes. French Army under Nepoleon conquered many European countries upholding policies of eradicating feudalism. This forced many European feudal rulers to accept reforms that liberated huge resources to be invested in production for profit rather than for luxurious consumption. Naturally the capitalist class were leading these revolutions.

After Opium Wars in 1840s, Britain emerged as the production centre of the world replacing China. Soon steam trains, railway lines, telegraph posts began to spread. As a result, the working class who is selling labour power at fixed wage rate to capitalist class began to show its strength as an organized class too. Small factories based numerous small capitalists were keeping prices low and driving wage rates high by competing each other.

Second Industrial Revolution (IR-2)

By 1870s, IR-2 began when exploiting economies of scale to counter competitors became main objective of the capitalists using new energy sources like electricity, gas and oil. The invention of internal combustion engine made use of these new energy sources to full potential. This led to the development of new industries like steel, automobiles, telephone, photography, etc. while old industries like railways, trains, telegraphs developed further. Progress in medical science reduced mortality rates in Western world and as a result not only did the Western population rose but also total fertility rate fell to 3 by the end of the 19th century. Chemical synthesis also developed to bring us synthetic fabric, dyes and fertilizer. The mass line production were made possible by centralizing research and capital structured around new “large factories” and the organizational models of production as envisioned by Taylor and Ford.

This resulted in big capitalists were forming cartels and competing out the smaller capitalists and other petty owners and the later were joining working class. Thus working class became a formidable force throughout the industrialized world during this time. At the beginning of the 20 ^th century, too many industrialized nations and huge profits from mass production resulted in over accumulation crisis and British supremacy was challenged. These events finally resulted in two world wars mainly between the industrialized countries.

In between World War 1, working class led communist revolution in Soviet Union shook the world. Soviet Union chalked out first planned economic model which not only liberated resources from feudalism but also allocated them towards education, health and physical infrastructures under the direction of state. After World War II, USA emerged as global economic centre while Soviet planning became popular among newly independent Third World countries. Communist revolutions won in China, North Korea, Eastern Europe, Vietnam and Cuba. Different brands of socialism emerged in Western Europe and Third World countries. The rise of socialism and communism can be attributed mainly to the nature of IR-2 which was based on large scale production. Thus the Third World had to use state led planned resource allocation to develop large scale production as private sectors were too small to mobilize such a huge amount of resources. Similarly, in developed countries, over production crisis and organized working class forced state involvement in the economy to create demand.

Post World War years of 1950s and 1960s gave the highest economic growth the world recorded yet. Space research, satellites, televisions, nuclear energy flourished in this time. But in 1970s, Soviet Union, Western World and Third World all started to face economic stagnation. State led economies were breeding inefficiency due to various workers’ rights.

Third Industrial Revolution (IR-3)

IR-3 or the Digital Revolution refers to the advancement of technology from analog electronic and mechanical devices to the digital technology with transistor and micro-processor. The era started during the 1970s. Third Industrial Revolution gave us computer, internet, and information and communications technology (ICT). New cyber virtual world came into being. High-level automation achieved in production due to invention of Programmable Logic Controllers and robots.

To counter the crisis of 1970s, Western world especially USA started to create profitable investments in asset trading often called finance. In fact computer, internet, ICT proved to be great force behind growth of finance. To ensure profit from finance, asset price was inflated by channelling debt inside asset market continuously. Thus financial capitalism came into being. USA specialised in finance while other developed countries specialised in new high-tech industries of the IR-3. Thus Third World countries got many low end and middle-end industries. Thus national production chain was replaced by global production chain giving rise to the age of globalization. Finance solved over accumulation crisis temporarily without state generated demand. Third World countries were racing to attract investment for production using its cheap labour. USA by attracting foreign debt in its asset market started giving market to the Third World made cheap products. Soviet Union while triying to integrate itself in global production chain collapsed in 1991. Thus planned economy came to an end. Law of market and profitability became more powerful than ever before.

IR-3 automated industries and invented new services. Thus women now started feeling as comfortable in outdoor jobs as men. In West, women started to participate in labour market more than ever before. Marriage as an institution started to collapse too. West started to adopt immigrant friendly policies to counter falling population growth rate. Fertility rate of the Western world fell below replacement rate (2.1) as a result during this time.

Increase in women participation in labour market, automation, rise of immigrants and globalization together destroyed the strength of the working class considerably in the West and other parts of the world. Identity politics based on race, religion, gender replaced working class solidarity throughout the word.

2007-08 global financial crises shook the process of globalization to the core. This is because China’s share of global GDP measured in PPP grew from 2.32% in 1980 to 18.11% in 2017. For USA it reduced from 21.92% to 15.26%. Thus Chinese GDP is growing too big to rely on US market while US GDP becoming relatively too small to act as global consumer. Western people began to show dissent against global supply chain and immigration which got reflected in electoral victory of Brexit, Trump in USA and Salvini in Italy. China started Belt Road globalization which depends on state led demand creation and not finance.

Fourth Industrial Revolution (IR-4)

During April 2013’s Hannover Fair, the idea of “Industry 4.0” was officially presented by Germany and since then the concept of IR-4 is getting popular. China’s “Made in China, 2025” is about the same thing too. Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum said that the Fourth Industrial Revolution is just beginning and is characterized by a range of new technologies that are fusing the physical, digital and biological worlds, impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human. The technologies that can change future include 5G with twenty times more processing speed than 4G and use of much shorter wave lengths; 3D which can use holograph for illustrating how a product works and more lifelike presentations; the internet of things (IoT) is a system of interrelated digital or mechanical devices (like home appliances or vehicles), animals or people that are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction which can revolutionize healthcare to transport system; Artificial Intelligence (AI) and robotics like drones can revolutionize agriculture to military; similarly 5G and IoT together can bring in smart cities which will make security lighting and audio much cheaper and easy to operate. Machine to machine communication, predictive maintenance of machines and machine to client interaction are the three main ways through which the Fourth Industrial Revolution will give benefits.

What can be Political and Economic Impacts of the Fourth Industrial Revolution?

Colonial policies and profit motivation gave rise to the IR-1 which again influenced destruction of feudalism throughout the West that further enriched it. Then competition among capitalists brought mass production ushering in IR-2 which created over accumulation crisis that strengthened working class and stimulated socialist model of state involvement in the economy. IR-3 ended state role in the economy and destroyed working class power by developing finance and global production chain. Low birth rate is new dimension since Third Revolution which is countered by immigration. Now as the Western world starts facing anti globalization and anti immigrant politics, the concept of the IR-4 is floated. Thus West is claiming that due to this revolution, high-tech professionals will be more in demand and automation will reach level that will destroy Third World’s cheap labour competitiveness. Thus manufacturing will be back to West and demand for immigrants will fall. But economic reality is not so easy.

If IR-4 results in many new industries, Western world can specialize in new industries while Third World can continue to have advantage in existing industries. Though it will surely raise the technology gap and income gap between the developed and the developing world. This may encourage more migration from Third World to the West.

World Economic Forum Report pointed out that 7.1 million jobs were lost of which two-thirds are white collar jobs (office and administrative) while 2 million jobs are created in computer, mathematical, architecture and engineering. The report said that technological disruptions rather than completely replacing existing occupations are likely to substitute specific tasks, freeing workers up to focus on new tasks and leading to rapidly changing core skill sets in these occupations. New skills still unknown will become key skills by 2020s. Thus re-skilling the existing employees are significant in face of future disruption arising from IR-4. Most private companies are not ready to take the challenge.

Private firms can only be passive consumers of ready-made human capital. Thus raising investment in human capital by increasing state investment in education, training and health is the most important step for winning competition in the coming age. People may have to specialize more in many set of skills and so starting age of participation in labour market can rise considerably too. Thus giving state scholarships for training may become essential too. Similarly, state investment in 5G type digital and physical infrastructures is needed to make smart cities possible. Thus IR-4 can force countries to liberate resources for state led investment. Too many resources in private hands may end up in lack of retraining programs making the countries non-competitive. Human capital of the West being more developed has competitive advantage. But any Third World country can beat West by allocating more resources to retraining and infrastructure. China can become role model for both developed and developing economies since China already enjoys most state led infrastructural investments and its Belt Road globalization also part of such plan. State investments in digital, physical and human capital can counter over accumulation crisis too in absence of finance.

Conclusion

IR-4 will not only ensure the rise of market socialist China but can make it role model to the whole world. Other Third World countries can face economic crisis due to lack of competitiveness in the next stage. Rise of China will weaken US finance in the near future making US production competitive again. Thus IR-4 can help USA to gain many manufacturing back from different Third World countries. Even if developed world remain content by specializing in new industries, gap between developed and developing will rise. This may trigger tremendous migration from Third World to developed countries. This will also result in political movement for releasing resources from private hands to state not only in Third World but also in those developed countries that will fail to compete in global market.

Destruction of Asian production created demand while capitalist led movements against feudalism created supply for IR-1. State led investments created demand while working class movements against feudalism, comprador capitalists and colonialism created supply for IR-2. Finance created demand while global supply chain breaking down working class solidarity and state investments created supply for IR-3. If IR-4 follows the trend of earlier IRs, then, state led investment in digital, physical and human capital will create demand while liberating resources from finance, failing to upgrade capitalists will create supply for IR-4.

Chinese led Bet Road Globalization already has started the demand side of IR-4. Gradual weakening of US led world order since 2007-08 financial crises will ultimately end up in weakening of US finance. This may further encourage Third World, South Europe and East Europe to take steps to liberate resources for competing in the age of IR-4. If steps will come in violent revolutionary way or peaceful reforms is yet to be seen. But it depends on how fast IR-4 is going to hit 2020s, how fast US finance to recede and demographic conditions. In 2030s almost all countries other than Africa’s will start showing less than replacement rate fertility rate. Other than China, no Third World country has shown significant rise in GDP per capita growth since 1980s. Thus as these countries will face end of labour supply boom, they may be forced to take productivity enhancing policies. Hence our prediction is other than China and Africa, most of today’s developing world will see political upheavals due to end of labour supply boom and disruptions from IR-4.